Neoliberalism Comes
to South Africa

by Patrick Bond

JOHANNESBURG, SOUTH
AFRICA -- President Nelson Mandela's cabinet
shake-up at the end of March was, in the view of many progressive observers, a
profound blow for this country's transformation. Non-governmental
organizations, community groups and organized labor greeted the startling
closure of the Reconstruction and Development Ministry -- which had been housed
in Mandela's office and was led by ex-trade union leader Jay Naidoo -- with
dismay.

Naidoo's mission had been to implement the Reconstruction and Development
Program (RDP), a 150-page document adopted by the African National Congress
(ANC) as its 1994 campaign platform. The RDP was a product of decades-long
grassroots, shopfloor and community struggles, and to a large extent carried on
the traditions of the militant 1955 Freedom Charter, a nationalist document
which represented the ANC's program through its decades in exile and in
resistance to apartheid. It represented an expansive social policy that
might also have spurred much more balanced economic growth. Mandela and Deputy
President Thabo Mbeki insist that the RDP will continue, arguing that it is now
so well embedded throughout the administration that a separate ministry is no
longer needed.

The catalyst for the shake up was the resignation of Finance Minister (and
former banker) Chris Liebenberg and his replacement by Trade and Industry
Minister Trevor Manuel, a black ANC activist with no formal economic training.
This change is expected to speed the pace of the various facets of South
African economic liberalization: widespread economic deregulation, lifting of
currency controls, privatization, and generally more reliance on the market at
the expense of government direction and intervention. In the months and years
ahead, South Africa's orthodox macroeconomic strategy, which was beginning to
come under fierce challenge from progressives, may well follow the aspirations
of domestic and international bond traders and merchants even more closely, to
the frustration of workers, the poor and even productive enterprise.

For critics who believe liberalization is likely to heighten economic
inequality (and also mire the country in economic stagnation), there could
hardly be a worse time to defer to market forces. South Africa's per capita
gross domestic product (GDP) of $2,700 is approximately equal to that of Chile,
Brazil and Malaysia, is substantially higher than Poland or Thailand, and is
far higher than any other large African country. But with a legacy of apartheid
married to extremely skewed, concentrated wealth, South Africa remains
characterized by:

dire poverty -- more than half of the population lives in households
earning below 300 rand ($72) per month -- highly concentrated in rural areas
(in particular, in former "bantustan" homelands in the Eastern Cape,
KwaZulu-Natal and the Northern Province) and among women and youth;

extraordinary levels of income inequality (the top 5 percent of the
population consume more than the bottom 85 percent), matching Brazil and
Nigeria as major countries with the worst distribution of wealth;

ongoing racial bias in income distribution, as 95 percent of the poor
are black "African," and 4 percent are "colored" (mixed race), with whites and
Indians comprising less than 1 percent of the poor;

inadequate access to basic services, with fewer than one third of
Africans having internal taps, flush toilets, electricity and refuse removal;
and

a UN Human Development Index (measuring life expectancy, literacy and
per capita GDP) for Africans that ranks at approximately the level of the
Congo, while the index for whites is at the level of Canada and New Zealand.
The national unemployment rate stands between 40 percent and 50 percent, and
only 12,000 net jobs have been created during the cyclical upturn that began
three years ago, following the longest depression (from 1989 to 1993) in the
country's history. Another downturn is likely in 1997, with steady
manufacturing job losses likely to intensify.

The demise of the RDP

Even as the scale of the country's poverty and stark inequality has
prompted ever-more urgent demands from activists and ordinary people for
immediate redistribution programs, elite policymakers have deepened their
commitment to the unfettered market. Neoliberalism has never been as dominant
in South Africa as it is today, after Manuel brought the market-friendly
philosophy to the ANC when he took over the economic policy desk in the early
1990s.

On a variety of occasions prior to the April 1994 elections, Manuel pushed the
ANC to back policies favored by financial and export-oriented mining interests.
These include: endorsing the General Agreement on Tariffs and Trade (GATT);
guaranteeing Reserve Bank independence in the constitution; agreeing to the
first International Monetary Fund (IMF) loan since 1982 (with strict fiscal and
monetary constraints); failing to contest the rescheduling of South Africa's
apartheid-era foreign debt on onerous terms; and introducing neoliberal
cost-recovery mechanisms in social programs ranging from education to health
services to basic infrastructure provision. Such decisions were meant to prove
to business the reasonable attitude of the ANC, and to spur renewed investment
confidence.

But the ANC slide to neoliberalism has been slowed by its rhetorical
commitment to, and widespread popular support for, the RDP. The RDP had raised
popular expectations -- not unreasonably -- for one million new houses, the
redistribution of 30 percent of good farming land, equality in education and
culture, new environmental safeguards and major inroads into the power of big
business.

Aside from a few successful upgrading projects to rebuild houses and supply
services in violence-torn townships near Johannesburg and the provision of new
water and electricity hookups (under highly commercialized conditions),
however, the only major promises that have survived the retooling of the RDP
are free primary health care and constitutionally guaranteed reproductive
rights.

Several programs in key RDP areas -- especially urban and rural infrastructure
-- were designed by austerity-driven World Bank teams. Whereas the RDP promised
real houses and access to full services, experts from the Housing Ministry and
the RDP Ministry decided -- under World Bank influence and without public
debate -- that South Africa could not afford anything more than "toilets in the
veld" (serviced sites in the countryside), that these should be privately
provided, and that water will be limited to communal taps and electricity to
high-mast lighting instead of household access.

Under this top-down, non-participatory and parsimonious model, South Africa's
slums are likely to look worse after apartheid than before, as a result of
intensifying inequality, joblessness and the growing housing crisis. Indeed
very little has occurred by way of development in the townships and countryside
since the ANC took power in May 1994.

Fewer than 40,000 low-cost houses have been built during Mandela's
administration, for example, far short of the pace needed to reach the RDP
target of one million by 1999. Here, the costs of the ANC's heavy reliance on
market mechanisms and market institutions is clear. The late Housing Minister
Joe Slovo, former head of the South African Communist Party, negotiated an
arrangement whereby commercial banks would provide low-interest loans to new
home buyers. Despite government backing, the banks have failed to make cheap
credit widely available. And the principle that commercial lenders should take
their lead from mass-based community groups, known as civics, in the financing
of community-controlled development has been abandoned.

The original RDP envisaged the construction of a "strong but slim" democratic
state apparatus that would redistribute wealth and ensure that organizations in
civil society had every chance to exert community and worker control over
development. Basic goods and services were to be provided as entitlements, not
commodities. The technical details had largely been established, fiscal
constraints understood and mass popular support for the RDP mobilized.

A good example of what could be accomplished is the housing in "Tamboville 2"
in a township east of Johannesburg. Under the guidance of the local mass-based
"civic association" and with the support of a well-respected, progressive
non-governmental group, the project received full subsidies for dozens of new
-- small but comfortable -- houses with full services, collectively owned by
the residents so as to ensure permanent affordability. The one catch was that
the French government had to supply all of the money involved, as the subsidies
required were double that provided in the official subsidy program, which also
did not initially cater to housing cooperatives.

One interpretation of the broader RDP failure blames Naidoo's own weaknesses.
Naidoo allowed implementing policies and programs to be hijacked by
apartheid-era bureaucrats (whose jobs are guaranteed by constitutional
"sunset clauses"), and was inexplicably averse to funnelling policy-advisory
roles and capacity-building funding support to non-governmental progressive
groups in civil society. Many community groups and non-governmental
organizations have collapsed for want of funding, as international donors
continue to switch their loyalties from anti-apartheid civil society to
the new state. And many were simply shut out of the policy process,
particularly in the fields of urban housing and infrastructural services, as a
result of pacts among ANC politicians, white bureaucrats and white businesses.

"We are facing more resistance to playing our legitimate role as a social
movement, as a force that raises issues and embarks upon coordinated campaigns
to counteract the power of big business and conservative elements within the
state," says Mzwanele Mayekiso, leader of the main community organization in
Johannesburg's Alexandra Township.

Marketable macroeconomics

But if grassroots development processes have never taken on the
"people-driven" character that the RDP pledged, it is in the realm of
macroeconomics that hopes for redistribution have been most conclusively
shattered. The policy chatter most amenable to bond markets -- fiscal
discipline, free trade, financial deregulation, flexible labor markets and
"sound" monetary policies -- has drowned out even mildly Keynesian voices
calling for state involvement in the economy. There is a sense, here,
explicitly articulated by Manuel, of the omniscience of the market, a view that
"There Is No Alternative" to steady liberalization, and a perennial hope that
some South African exporters will prosper with a free-trade and free-market
regime.

Meanwhile, the country's financial managers sit atop a potential volcano. Real
interest rates on South African bonds are 8 percent, compared to 4.95 percent
in Britain, 4.78 percent in Germany, 2.96 percent in the United States, 3.3
percent in Japan and 3.21 percent in Australia. This spread has generated an
enormous inflow of footloose foreign investment which has rushed to cash in on
the high interest rates. In 1995, more than half the turnover on the
Johannesburg Stock Exchange was of foreign origin. But it has also wreaked
havoc on the South African currency.

So too has the neoliberal approach to the balance of payments, which included
lifting the most substantial exchange controls. The current policy permits a
steady flow of luxury consumer goods, departing from an original RDP call for
taxation on luxury goods to conserve foreign exchange for necessities.

Manuel berates African countries for the excessive reliance and then blame
they place on the World Bank, IMF and World Trade Organization. "Rather than
seeing these institutions as God or the Devil incarnate, my view is the
agnostic one that says, `Shit! This thing is here! It's alive. Let's rather
work out how to deal with it, let's study the countries who have worked the
system because they dared to understand it,'" he says.

Manuel has attempted to establish some South-South trade relationships
(particularly with India and Brazil), but these do not begin to challenge the
more traditional North-South trade patterns. And rather than building ties with
Southern African countries, as the RDP insisted should be a top priority,
Manuel and his colleagues bowed to the wishes of local industrialists, pushed
hard for regional exports but blocked imports, and in the process profoundly
alienated nations which had long sheltered the ANC in exile.

During his 1994 to 1996 stint as trade minister, Manuel pulled down tariff
walls much faster than the WTO required. As a result, key sectors that were
once considered potential export success stories -- clothing, electronics,
appliances -- have shrivelled.

Vested interests still have some residual clout, however. Pressure from the
country's biggest company, Anglo American, kept tariffs high enough to justify
major new (and highly subsidized) industrial investments.

For all Manuel's efforts to force South Africa into global markets and
institutions, the country has not fared well there. During 1993 GATT
negotiations, the late U.S. Commerce Secretary Ron Brown had South Africa
classified as a "developed" rather than "developing" country. Partly as a
result, South Africa lost preferential trade privileges and ran a $541 million
trade deficit with the United States in 1995. Similarly, the European Union
(EU) is negotiating with South Africa an extremely exploitative free trade
agreement which treats South Africa as Europe's industrial equal. Some leading
ANC parliamentarians are resisting the EU deal on the grounds that it would
wipe out an enormous proportion of industry.

At home, Manuel as Finance Minister is expected to continue his
market-friendly approach. Exchange controls are expected to be completely
lifted within months or even weeks, notwithstanding limited foreign currency
reserves and a frightening slide toward Mexico-scale meltdown in February, when
the rand's value dropped 10 percent within a few days on groundless rumors that
Mandela was sick.

Manuel is also expected to lend support to proposals for corporate tax breaks,
location incentives and even export processing zones, adding to the package of
"supply-side measures" (subsidies for big business) he announced late last year
to boost South Africa's export competitiveness.

In contrast, the RDP proposals to promote demand through mechanisms such as
targeted consumer subsidies, to favor basic needs through, for example, taxes
on luxury consumption, and to promote worker ownership seem to have fallen
entirely by the wayside. Neoliberal bureaucrats appear intent even on denying
subsidies to impoverished consumers of electricity and water.

Many in the business community defend the government abandonment of
expansionist or redistributive policies on the grounds that such spending will
balloon the government deficit. Business economists regularly cry about the
danger of a "debt trap" and the dreaded specter of "macroeconomic populism."

In reality, the government deficit only amounts to 5.1 percent of GDP, down
from 8 percent in 1993. It will fall further this year, as the government
undertakes a program of rapid privatization, following negotiations with the
Congress of South African Trade Unions (COSATU). Nearly half of South Africa's
GDP is generated by the state and parastatals.

Total public debt is 56 percent of GDP, less than the proportion found in the
United States, Japan and nearly all European countries. The foreign debt of $20
billion is almost entirely inherited from apartheid years, but still
there is no effort by nervous ANC financial technocrats to reschedule on better
terms.

On the revenue side, outgoing Finance Minister Liebenberg's recent budget
"reduces the progressivity of the tax structure, calls into question its
equity, and mitigates against its use as an efficient tool for redistribution,"
according to the University of Cape Town's conservative School of Economics.
South Africa's maximum marginal tax rate of 45 percent is below that of most
European countries.

Greed vs. need

Big business is nevertheless not satisfied. Anglo American Industrial
Corporation Deputy Chair Leslie Boyd complains that the "gradualist,
politically correct" budget "does not improve the investment environment as it
does not commit government to privatization, relaxation of exchange controls,
reduced taxes, investment incentives, a radically reduced deficit and lower
consumption spending."

South Africa's 50 largest corporations released a policy paper -- "Growth for
All" -- in February that exhibited a new degree of greed. It calls for a
separate second-tier labor market with much lower starting wages, accelerated
privatization, a more vigorous export drive and a renewed focus on fighting
street crime.

In principle, corporate executives concede the need for South Africa to
embrace competition internally as well. But in fact the top five conglomerates
-- Anglo American (roots in diamonds and gold), the Sanlam insurance empire
(Afrikaner financiers), the Rembrandt Group (another Afrikaner empire based on
tobacco which has relocated to Luxembourg), the Old Mutual insurance
conglomerate and Liberty Life insurance -- own 80 percent of stock market
shares, with no prospect of a break up in sight.

Although Manuel often spoke of the need for a tough competition policy -- in
the process bickering publicly with Anglo American executives -- in almost two
years as Trade and Industry Minister (and four before that in the ANC) he has
failed to promote anti-trust legislation.

Even ongoing attempts to pull a tiny black business elite up to the economy's
commanding heights have faltered. During the 1960s, Anglo American
strategically disposed of some mining interests (now Gencor, part of Sanlam) so
that Afrikaner rulers would have a stake in the mining sector's profitability.
Today, Anglo has "unbundled" its huge brewery and some of its press and
industrial interests with the intent of "black economic empowerment," again to
curry favor with the current regime in Pretoria. But it took a surprise
resignation from parliament by former mineworker leader and constitutional
negotiator Cyril Ramaphosa in April before a consortium of black investors,
pension funds and a few trade unions -- under Ramaphosa's lead -- drew together
the $1.2 billion required to buy the Anglo American spinoffs.

COSATU ridicules big business efforts to transfer wealth to blacks. Its
report, "Social Equity and Job Creation," states, "Current efforts by
conglomerates to `unbundle' are no more than corporate camouflage which retains
power and control in the small group of shareholders and their directors."

Led by clothing and textile workers' union leader Ibrahim Patel, COSATU has
advocated job creation by reorienting the economy to meet basic needs
production. COSATU also calls for a more aggressive industrial policy, and more
cautious engagement with the world economy.

The COSATU and business plans will be debated in the National Economic
Development and Labour Council -- a formal business-labor-government policy
advisory group -- alongside government's upcoming revision of the RDP. But that
is not much source for optimism, given labor's poor performance in prior
Council negotiations.

Still, with the ANC the dominant political force over at least the next couple
of decades, it will be up to civil society -- community groups, trade unions,
women's organizations, youth, the disabled, environmentalists and others -- to
demand that the 1994 RDP campaign promises are kept. Such organizations are
today weaker than they were two years ago, but their vibrancy and insistence on
a more durable transition from apartheid will ensure that
notwithstanding the various paths that former movement leaders may take, this
society will never forget that the point of its struggle for national
liberation was also social justice.

A Labor Perspective on the South African Economy

Tony Kgobe is National Organizer with the National Union of Metalworkers of
South Africa (NUMSA).

Multinational Monitor:What are the immediate struggles now facing
the labor movement?

Tony Kgobe: Privatization negotiations, which began late last year when
we threatened national strikes, have bogged down. We expect developments by
mid-year. Aside from preventing privatization, we have told the Department of
Trade and Industry that we need to slow and possibly stop the tariff reduction.
While we have obligations under GATT, we need to go back and say it is not
workable.

MM: What's the meaning of the recent cabinet shake-up?

Kgobe: Just from my own perspective in the union, it seems that the
state is now better situated for tough negotiations now underway on
privatization, especially the sale of Telkom [the national phone company]. They
needed someone with clout to sell it to the unions, and that's Jay Naidoo
[former general secretary of the largest trade union federation, who was moved
from the RDP Ministry into Posts and Telecommunications]. He'll be instructed
to do some form of joint venture with AT&T or another multinational. But
that won't lead to more telephones for our people. That is the contradiction
that will make his job very difficult indeed.

Make no mistake, our former leaders are still popular within the ranks of
workers. But the anticipated job loss from privatization and tariff reductions
is frightening. For the state, it will be a hard sell.

MM: Does the closure of the Reconstruction and Development Ministry
worry you?

Kgobe: Yes, because the RDP itself is in question, which is a pity. You
go back to promises made in the RDP, and find that basic goods and services are
meant to be decommodified and universally available. But now they are being
increasingly subject to cost recovery and to lower standards, due to what
government says are fiscal constraints. So it is clear that we must go back and
fight for those promises to be kept.

The balance of forces determine our strategy. Without falling into the
trap of becoming a victim of our own propaganda, it means using the RDP --
which is premised upon delivery of goods and services -- as the minimum
platform. That should be the way forward.

MM:What are ordinary workers experiencing, in economic terms?

Kgobe: Given the lack of jobs and all the pressure associated with
economic restructuring, the very survival of workers is threatened more than we
can ever remember, and this means that some are retreating into individualism.

We are often under attack in the business press for becoming a "labor
aristocracy" among the masses of poor people. But actually, if you consider the
fact that so many employed workers support their extended families, this is
just a divide-and-rule strategy. I'm looking after eight people myself -- my
mother and siblings and several friends -- and that is not uncommon.

MM:And which organizations would they look to for direction during
this period?

Kgobe: The unions have become the primary political representatives of
workers now, which was certainly not the case prior to the ANC taking power.
But if unions operate within the parameters that have been set, we're going to
have our own set of problems, because the parameters are very corporatist. They
depend upon us making deals with big business and big government.

MM: The Congress of South African Trade Unions (COSATU) seems to have
embraced corporatism -- a cooperative approach with industry and government --
with enthusiasm. How do you explain this?

Kgobe: It's not the unions uniformly. It's a collection of leaders and
their intellectual allies who believe that this is the only way forward. But
they are taking a major risk, because the deals are not paying off.

So these union leaders, ironically, have been saying to business, please talk
to us, let's do deals. But business leaders are saying that they don't need
this approach anymore, they don't really need structures like the National
Economic Development and Labor Council [NEDLAC]. This and similar structures
have been gaining influence for the last few years, but perhaps we have come to
the end of their usefulness. Some leaders of government also now seem very
hesitant to subject their plans to NEDLAC.

As for the unions, NEDLAC traps the labor movement into perpetual discussions
with the bosses. The bosses, meanwhile, just knock on the door of their
favorite ministry and get what they want. So we have a very unequal power
relationship. This is why COSATU pulled the privatization negotiations out of
NEDLAC.

MM:Could you have better handled the opportunities?

Kgobe: We as unions went into these corporatist structures without a
clearly defined agenda. It would have made a difference if we'd unified our
strategic orientation. Then we could have walked out if we didn't get our way.
That would have left us in a position to have bilaterals with the ANC
government, which may still be the best route. So part of the problem has been
our own lack of clarity.

But I think in the next round of struggles, we won't necessarily want to use
these structures. It will be back to basics -- shopfloor organizing and mass
action -- as well as advancing a much tougher agenda on economic policy and
development.

MM:Would this have political implications for the "Alliance" between
the ANC, the Communist Party and COSATU?

Kgobe: There are two possible routes forward. First is the position that
the ANC is still a party that demands our support, and that as a worker-leader
you have to work within it to win its "heart and soul." I don't think the South
African Communist Party will pull away from the Alliance anytime soon, which
means that this position will remain very strong.

The other argument is that the ANC's soul is already too far lost, given the
policies it has adopted since coming to power. What you need is an alternative
which is rooted within the labor movement, which really means a new political
party. And since many workers are now scornful of the Alliance, it may be that
within a few years, mass support for a Workers' Party will emerge.

Overcast Environment

ONE OF THE AREAS in which the new South African government could easily have
attacked corporate power was through enhanced environmental protection.
Instead, growth and attracting multinational corporate investment have been the
overriding concerns.

One sign of the government's unenlightened environmental policy is its embrace
-- or at least tolerance -- of the global toxic trade. In 1994, with the
Environment Ministry's apparent approval, a scheme was hatched to ship
U.S.-created toxic waste stored in Finland to South Africa, but trade unions,
community groups, environmentalists and progressive lawyers mobilized to
prevent it. This popular protest embarrassed Environment Minister Dawie de
Villiers, a holdover from the apartheid era, but did not cause a
fundamental change of heart.

Recycling of toxic waste has been a longstanding issue in South Africa thanks
to struggles against the British firm Thor Chemicals. Thor's mercury
importation, burning and supposed recycling have killed at least two workers
and seriously injured nearly two dozen others. Although an official South
African commission was recently given limited terms of reference to investigate
the company, Thor's opponents sense they are on the verge of a larger
international victory thanks to a British decision to allow victims to sue Thor
in England for its South African subsidiary's activities. With this precedent,
another British firm will soon be sued in a South African asbestos case.

Nevertheless, a local company is currently proposing to import 10,000 tonnes
of German waste plastic per month. According to Chris Albertyn, coordinator of
the Environmental Justice Networking Forum, no studies of the project's impact
on the environment or worker health have been conducted. Yet the proposal is
apparently being considered favorably in the Trade and Industry Ministry.

Albertyn says the new government's approach is "indicative of the kind of
thinking that has prevailed since the apartheid era. There is a very
strong perception in the Trade and Industry and Finance Ministries that any
environmental concern is a brake to development."

That thinking was reflected in the extremely low-key official response to at
least two mining and industrial disasters that occurred last year: the Vaal
Mine Reefs accident in which 104 black mineworkers were killed in an
underground vehicle crash due to negligence by an Anglo American-owned company;
and the 1995 fire at Anglo American's AECI chemical subsidiary, which killed
two and injured hundreds of working-class and poor people living nearby.

Environmental destruction is occurring at the hands of even one of the most
progressive ANC politicians, Water Affairs Minister Kader Asmal [see "Making
the Earth Rumble"]. Asmal has endorsed the World Bank's Lesotho Highlands Water
Project, which will carry water by tunnels from neighboring Lesotho across
catchment zones to Johannesburg at the risk of drying up the Orange River.
Rural Basotho people are now mobilizing against the socio-economic devastation,
and there is also new evidence of design flaws in the huge dams which have
caused a large fault to open up in the mountainous region's geology.

One partial exception to the disturbing environmental trends appeared to be a
South African court order halting titanium mining at the beautiful St. Lucia
estuary by the British-Canadian multinational Rio Tinto Zinc in order to
promote large-scale eco-tourism. But Albertyn warns that the track record of
major international hotel and eco-tourism "threatens an equal if not greater
rape of St. Lucia."

A silver lining in the otherwise overcast environment, however, is that the
Environmental Justice Networking Forum has rapidly expanded its base to include
COSATU trade union affiliates, the South African National Civic Organization
and 225 NGOs, and will broaden into the rest of Southern Africa later this
year. Although the network's access to Environmental Ministry officials at
national and provincial levels is generally weak -- given the overpopulation of
National Party politicians and apartheid-era bureaucrats -- ordinary
South Africans nevertheless still know how to shake up the government and
corporate polluters through grassroots activism.